What is the Green Deal?

The Green Deal is a Government scheme set up to encourage householders and businesses to improve the energy efficiency of buildings.

Under the Green Deal, owners, landlords and tenants of domestic and non-domestic properties will be able to install certain types of energy efficient measures with no upfront costs.

How does the Green Deal Scheme work?

A “Green Deal Assessor” is appointed and will make recommendations in respect of the inspected property in terms of which energy efficiency measures are suitable for the particular property in question, having due regard to the geographical location of the property, the energy saving work already in existence on the property etc.

Under this scheme, owners, landlords and tenants of domestic and non domestic properties will be able to install and improve energy efficiency with no upfront costs.

The cost of Green Deal improvement works will be financed through an unsecured loan (called a ‘Green Deal Plan’) and that loan will be paid back over the loan period through the property’s electricity bills, by the person responsible for paying those bills. The Green Deal Plan does not constitute a legal charge over the property.

In order to qualify for green deal finance, the expected financial savings will be equal to or greater than the cost of repayment over the term of the loan.

The most important thing to bear in mind is that Green Deal repayments are attached to the property and not the person who entered into the Green Deal Plan. The amount borrowed in terms of the Green Deal Plan is repaid by whoever is the electricity bill payer for the property at the relevant time. Any arrear payment arrears will be the responsibility of the person who was the electricity bill payer at the time the payment was due.

How can you tell prior to either renting or buying a property whether there is an existing Green Deal Plan?

The Energy Performance Certificate (EPC) for a property, provided by the current energy provider of the property is used to disclose whether a Green Deal Plan is attached to that property and will advise of the amount outstanding in terms of the Green Deal loan, if applicable.

Once the Green Deal improvements are made, after the person seeking such improvements obtains necessary consent from third parties, such as planning, owners, freeholders, funders etc., and then the Green Deal Provider (who finances the Green Deal Plan) will arrange for the Green Deal Assessor to lodge a new EPC to reflect the existence of the Green Deal Plan.

Points for a Landlord/Tenant to consider?

Landlords may benefit from improved value of the property and foreseeable projected marketability of their property by virtue of the increased energy efficient measures installed on the property. However Landlords must also bear in mind that by virtue of the fact that the green deal loan is paid back by the current energy bill payer of the property, if the property is vacant, the landlord may, under certain circumstances, need to make Green Deal repayments until a new tenant moves in and starts paying the electricity bill.

Landlords must disclose the Green Deal to prospective new tenants and include same in tenancy agreements. Disclosure is done by providing prospective tenants with a copy of the EPC which will show any energy efficiency improvements made under the Green Deal, the Green Deal repayment amount, how long the Green Deal repayments need to be made for and the name of the Green Deal Provider. Tenants must also be weary when taking out a new lease, to make sure that are aware and have sufficient knowledge as to whether they will be subject to repaying a green deal loan, during their period of tenancy.

By April 2018, landlords will be unable to rent out their properties if their properties have lower than an E rating on the property’s Energy Performance Certificate unless they can demonstrate that they have taken advantage of all the Green Deal upgrades available to them.

Points that sellers/buyers of property should consider?

When a property is sold, the Seller must disclose the details of any Green Deal Plan to prospective buyers. Disclosure is done by means of the EPC certificate, which will show any energy efficient improvements made, the Green Deal repayment amounts, how long the Green Deal repayments need to be made for and the name of the Green Deal Provider.

Sellers must also obtain the buyer’s express written acknowledgement that the buyer will be liable for the Green Deal installments and the Green Deal Plan, which is likely to be included in contracts for sale.

The new buyer may require the seller to repay the Green Deal loan in full on completion of the sale, which could attract early repayment charges for the seller.

Loschinee Naidoo

Compliance Associate

Legal Eye Limited

21 April 2014